August 01, 2017

Mallinckrodt Settles Anti-Competitive Practices Suit

Mallinckrodt and the Federal Trade Commission (FTC) recently agreed to settle allegations of raising drug prices and engaging in anti-competitive practices by paying a $100 million fine and allowing a competitor to produce a similar medication. The drug, H.P. Acthar Gel, is used to treat infantile spasms and multiple sclerosis. Mallinckrodt allegedly raised the price of the prescription from $40 per vial to over $34,000 per vial.

According to New York Attorney General Eric Schneiderman’s office, Mallinckrodt’s United States subsidiary (Questcor) purchased the drug in 2001 and raised the price an estimated 85,000% over the course of time. The complaint filed by the government and three state attorneys general further alleges Questcor thwarted attempts by competitors to introduce similar drugs into the marketplace by constantly out-bidding them in attempts to acquire Synacthen – a drug used to treat the same conditions.

In addition to paying the fine, Mallinckrodt will license Synacthen to Marathon Pharmaceuticals for infantile spasms and nephrotic syndrome, two FDA-approved uses of Acthar. However, Mallinckrodt will retain the right to the drug for other indications, such as Duchenne muscular dystrophy.

FTC Chairwoman Edith Ramirez released a statement, saying, “Questcor took advantage of its monopoly to repeatedly raise the price of Acthar, from $40 per vial in 2001 to more than $34,000 per vial today – an 85,000% increase. We charge that, to maintain its monopoly pricing, it acquired the rights to its greatest competitive threat, a synthetic version of Acthar, to forestall future competition.”

AG Schneiderman stated, “This is an egregious case of a monopolist doing a deal to eliminate potential competition and to keep its power over pricing. This settlement will restore the competition that was prevented by Questcor’s illegal actions.”

In response to the settlement, Mallinckrodt released a statement, “We are pleased to confirm that we have entered into a settlement agreement with the FTC staff to fully resolve this matter, subject to approval by the commission. We will comment further at the appropriate time.”

In an investor note, Wells Fargo analyst David Maris said the settlement news “was not as bad as some had initially feared, and we are not sure it qualifies as bad news in the final analysis. The $100 million payment won’t be difficult for Mallinckrodt to bear, Maris figures, and developing Synacthen in infantile spasms and nephrotic syndrome will take years of work.

“To us, the news of a settlement is much better than the initial ominous-sounding headlines that came across about pending charges,” Maris wrote, adding, “We believe there are a lot of risks associated with developing Synacthen for Acthar indications, and as such, we doubt that even if successful, we will see any Synacthen-related approvals for possibly 7-plus years.”